Robbins Arroyo LLP: MiMedx Group, Inc. (MDXG) Misled Shareholders According to a Recently Filed Lawsuit
Robbins Arroyo LLP announces that a lawsuit was filed against MiMedx Group, Inc. (NASDAQCM: MDXG) in the U.S. District Court for the District of Minnesota. The complaint is brought for alleged violations of the Dodd-Frank Act by MiMedx. MiMedx develops, processes, and markets patent protected and proprietary regenerative biomaterial products and bioimplants processed from human amniotic membrane and other birth tissues, and human skin and bone.
MiMedx Accused of Engaging in Revenue Recognition Scheme
According to the complaint, MiMedx implemented a fraudulent revenue recognition scheme to artificially inflate quarterly revenue. Since at least 2014, MiMedx engaged in a scheme of “channel stuffing,” which MiMedx used to fraudulently recognize revenue in its certified financial statements before the revenue had been realized and earned. Under the scheme, MiMedx entered into a distribution agreement with a contractor which allowed MiMedx to sell directly to government accounts. MiMedx would then send its products directly to the Department of Veteran’s Affairs (“VA”) hospitals, but neither the contractor nor the VA requested the orders. MiMedx would claim these orders as revenue to meet its quarterly forecasts, even though the VA hospitals were unaware of the channel-stuffing orders.
The complaint alleges that MiMedx’s revenue recognition scheme did not meet the conditions for recognizing revenue under Generally Accepted Accounting Principles. Further, MiMedx misleadingly categorized its revenue as government sales, even though the government is not a party to the initial “sale.” MiMedx failed to provide any disclosures in financial statements that it accelerated material amounts of sales revenue as a business practice or discussed its financial implications for future periods. As a result, MiMedx’s revenue has been artificially inflated for several reporting periods.
MiMedx Shareholders Have Legal Options
Concerned shareholders who would like more information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.